Stable market dips only slightly

WASHINGTON -The three major housing market indicators continued to slip into stability in October, if one is to credit what the pundits said about them.

Both of the sales figures-existing homes and new homes-lost ground in October. Resales finished the month at 4,960,000 units on a seasonally adjusted annualized basis, off 3.9 percent from their September level. New-home sales dipped 2.6 percent below the September number, to 928,000 units on the same basis.

Housing starts finished October virtually dead even with September, at 1,532,000 units on a seasonally adjusted annualized basis.

The stability of the housing market, according to the analysts, is underscored by the fact that all three indicators are holding fast near their historical highs. Resales are holding steady around the 5 million unit mark, starts are doing the same in the neighborhood of 1.5 million units, and new-home sales remain above the 900,000 level.

Certainly, all three numbers are getting support from the softening in mortgage rates, which, as David Orr, chief economist of First Union Economics Group, pointed out, have retreated about 75 basis points from their high of about 8.6 percent (the nation's average for a 30-year, fixed-rate mortgage) in June.

"The lower rates and the newfound stability.have buoyed the spirits of home builders," Orr said. He added that, for year-to-date 2000, starts are down 4.6 percent "but that lower demand is exactly what the industry needed in order to take the pressure off the materials' prices and wage pressures."

The builders that Orr referred to agreed. Robert Mitchell, president of the National Association of Home Builders (NAHB), said the October starts number "indicates we are experiencing a good, solid, stable housing market. Our recent surveys of home builders indicate that they are more confident about the future and that traffic of prospective buyers is on the rise."

The analysts seemed untroubled by the nearly 4 percent loss in resales in October. Although the October number was more than 11 percent, the all-time high in resales, "the level of resales suggests that the housing market is still very much alive-just not as robust," said Michael Niemira, vp of the Bank of Tokyo-Mitsubishi.

Niemira also felt that the new-home sales level in October was "very respectable." First Union's Orr added the October new-homes total "tops the quarterly averages for the past four quarters. For the Fed, the continued solid picture for residential housing argues for less urgency on their part, offsetting the problems in the manufacturing sector."

Both the NAHB and the National Association of Realtors (NAR) cited the easing mortgage-rate picture for the relative stability in the sales arena. NAR president Richard Mendenhall said, "The decline in mortgage interest rates is helping to keep sales activity strong, and we expect the 30-year fixed interest rate to average close to 7.8 percent for the next year."

NAHB's Mitchell said new-home sales should finish 2000 at below the 900,000 mark, compared with the record-setting level of 907,000 for 1999. "But those would still be very strong numbers on a historic basis," he added.

Orr also noted another key factor in housing's stability: the fact that average home prices continue to firm in year-to-year comparisons. "That hardly seems like what would be happening if the housing market was on the verge of a major slowdown," he said.